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Political stability key for Palestinian economy

Investment in the Palestinian territories is a double-edged sword. As with all areas of high risk there is always the promise of high return, yet a certain level of political stability is needed to attract investment to the territories. The Palestinian Authority (PA) and its partners in the West are looking to attract investment in …


Investment in the Palestinian territories is a double-edged sword. As with all areas of high risk there is always the promise of high return, yet a certain level of political stability is needed to attract investment to the territories.

The Palestinian Authority (PA) and its partners in the West are looking to attract investment in the territories, but presently, the Palestinian economy is sustained mainly through pledges of aid by international donors.

At a curtain raiser for the Palestine Investment Conference last May, British Prime Minister Gordon Brown said, “My message is very clear: there is an economic prize before us. There is a double dividend for you as companies and the Palestinian people. There is a real chance to build on the ingenuity, skills and the commitment of Palestinians to build peace and prosperity across the region.

“It is a challenge that many companies, I hope, will now take up, and it is a challenge that can not only make a difference to the economic livelihoods of so many people who need our help, but also make a difference to peace throughout the world, Brown added.

Middle East Quartet Envoy Tony Blair said at the same function, “The West Bank economy has actually been growing. Despite all the problems, there are Palestinian businesspeople doing business and making money in Palestine.

Blair’s statement indicated the disparity between the West Bank – over which the PA has supreme control – and the Gaza Strip, which has been subjected to an Israeli siege cutting it off from the outside world.

Mohamed Alami, an equity trader in Naeem Dubai, is a Palestinian whose extended family has numerous investments in the Palestinian territories, mainly the Gaza strip.

“It’s not a political solution [that is needed as much as it is] political stability.

When that happened eight years ago businesses flowed in. [Investors] need to see stability, he told Daily News Egypt.

“The prospects of growth – it’s a big gamble at the moment. Palestinian businessmen would rather send money, as much as the people ask, but they would not take a step towards development, which is bad because when you develop a business and create jobs it’s a win-win solution, he added.

When Hamas wrestled complete control of Gaza from the PA in June of last year, the strip became isolated as Western countries refused to directly deal with the group.

Commissioner-General of the United Nations Relief and Works Agency for Palestine refugees in the Near East (UNRWA) Karen Koning AbuZayd told Daily News Egypt last January, “Businesses are collapsing [in Gaza] – 3,200 businesses collapsed in the summer over June. That meant another 80,000 people on the unemployment rolls. Eighty percent of the Gaza Strip is dependant on humanitarian assistance.

For now, the West Bank is in a better position than Gaza, as the ruling authority there has the backing of Arab and Western nations.

“In certain areas, the West Bank is much more stable than the Gaza Strip,

Alami said, “I can’t guarantee phenomenal growth but it will sustain itself. There are several businesses sustaining themselves in the West Bank rather than in Gaza.

Five months on from AbuZayd’s comments and the situation is no better in Gaza. The International Donors’ Conference for the Palestinian State held in Paris last December gathered $7.7 billion in aid pledges from Arab and Western countries.

There is also a more serious impediment to investment in Palestine according to Alami.

“Over the past five years, there has been huge investment in Palestine and things haven’t been solid; it’s a very high risk, it’s very volatile. For most of the businesses out there you would require a certain level of purchasing power amongst the consumers in the economy, he said.

“That’s the major problem in Palestine, there is no income. Most of the daily expenses they get through charity organizations and wealthy Palestinians living abroad, and it’s not necessarily spent on things like banking services but usually spent on basic goods like food.

A communiqué issued by the French Foreign Ministry in January after a follow-up meeting of the donors’ conference urged Israel to “encourage improved movement of goods and persons, which, as highlighted by the IMF and World Bank, is a prerequisite for a full economic recovery.

Alami said, “This is another constraint. As a participant in the economy, in most of the cases you have the supply of your business coming from abroad.

At the end of the day, in Palestine anything coming from abroad is almost impossible because of the siege. There is a total block on imports. There is a lack of jobs, especially in the Gaza Strip.

he World Bank predicted in April that the Palestinian economy would not grow in 2008, due to the restrictions of movement imposed by Israel.

Palestinian GDP – $4 billion – was expected to rise by three percent this year, but because of population growth the World Bank expected per capita income to remain static or deteriorate.

The World Bank report stated that “the private sector revival required for a virtuous cycle of growth has not been realized due to the continued restrictions on movement and access.

“As long as the political situation is like that, as long as Israel continues its political aggression, then businesses will stay out. They prefer to send donations, which is a very short-term solution and can’t be good for the economy, Alami said.

Topics: FJP

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